My income has been going up over time. My law firm has a decent "own occupation" group disability policy that covers 60% of our income, but has a maximum benefit of $15,000 a month, regardless of how much you actually make. My income has been significantly more than $15,000 a month for the last couple of years, and I am the primary earner in our household.
We live well within our means, and $15,000 a month would cover our basic living expenses, but it would be a drastic change in the amount we bring home. I have shopped around for private disability insurance. The sweet spot on price seems to be $10-15k in private coverage for an own occupation policy with Mass Mutual or Principal. It would have partial disability and catastrophic disability riders, but not cost of living. I could get that for about $3k a year, and the benefits would be tax free since it's a private policy.
Here are my questions:
1. Should I think of DI as "catastrophic insurance" where I buy the bare minimum to meet my living expenses? (i.e. stick with my group policy?)
2. I'm not sure that I'll be with my current law firm forever, so would it be worth locking in a lot of coverage as a 30-something in the preferred plus health category?
3. I am a partner at this firm, so my income is not guaranteed. If there were some "black swan" event where we had a really bad year and then I needed to use my DI the next year, the group policy would look back at the previous years' earnings to calculate my benefit, whereas the private policy would pay me my contracted rate. Is that something worth considering in my decision?
4. Are Mass Mutual and Principal good policies? Any differences I should be aware of? (Guardian was way more expensive and would only offer me an additional $5k in coverage. Even their broker told me to look for other policies).
5. It's confusing how the group policy and the private policy would interplay. Our group DI broker has no idea, and the policy language is very unclear. I'm concerned that if I needed the insurance, my group policy would automatically reduce itself because I have this private policy paying me as well.
Disability insurance - amount, private policy, riders
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